1% Cash Back is the Only Incentive Program I Need

Since August, 2015, I have deposited $507.38 in checks into my personal savings account from my Citi MasterCard. This cash isn’t a refund of an over payment or a credit due to a product return. It’s the money I’ve earned from the credit card’s 1% cash back on all purchases.

I’m not a big believer in incentive or loyalty programs. I don’t fly enough to earn more than a trifling of miles. I hate the extra baggage of loyalty punch cards. And I think fundraising “Entertainment” coupon books are pure tyranny.

You want to kill any spontaneity and joy in a marriage? Try this the next time the kids are at their grandparents’:

Me using excited voice: “Nora, drop everything, I’m taking you out to dinner.”Her: “But I look a mess.”Me using reassuring voice: “You look beautiful to me. Get your stuff, let’s go.”Her: “Ok, let me get the coupon book. You want Chinese, Italian, Greek, or American?”Me using deflated voice: “I don’t know, let’s just go to Tamber’s”Her: “They’re not in there. You want to go to Owings Mills, Columbia, or White Marsh?”Me using resigned robot voice: “Whatever you want honey.”

One incentive program I can get behind? One-percent cash back on all my credit card purchases, without me having to jump through any hoops. It just happens as a result of my using my credit card, something I’m going to do anyway.

Credit cards without any incentive are already man’s best friend (Sorry, Baxter) if they are used judiciously. Assuming you pay them off every month (and I do), you get these things for free:

A couple weeks float or grace period (essentially an interest-free loan) to pay off charges

Depending on your card, other features like free travel or car rental insurance

A mechanism to build your credit score

The ability to quickly and easily accumulate debt if a disaster strikes

You want to keep your credit card month-to-month debt carry-overs to a minimum or it will quickly wipe out all those other benefits, but this ability to essentially borrow money can be a life-saver in a pinch. Just be sure to pay it off as quick as you can.

If you’ve done the math, you know that I’ve charged $50,738 on my credit card in under two years. That sounds like a lot, but I think it’s pretty typical for a middle-class family of four that attempts to charge practically everything – even McDonald’s Happy Meals – to a card.

Debit cards are good for people who aren’t disciplined and can’t be sure they’ll pay off their balance every month. As for me and my house, we will serve the Lord…and pay via credit.

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Comments

My wife & I make all purchases over $20 on a rewards credit card. While I have been a long-time fan of cash back credit cards, our primary card for the past year has been a hotel rewards card. We get bonus points for hotel stays, groceries, and dining.

As the average redemption rate is between 0.5 and 0.7 cents per point, it’s not as good as a cash rewards card and we probably should do our non-travel and food purchases with another card. For now, we are more focused on aggregating points that allow us to get two free nights each year. The “free” hotel nights are more valuable to us at the moment than cash.

But, that might change in a few years as our family grows and we have to start book two rooms to sleep everybody.

That’s a good point. Depending on what you value, different cards will make sense. Hotel rooms for you, cash for me, perhaps airline miles for someone else. Just as long as you are working towards something!